Is Ben Bernanke Santa Claus?

US Federal Reserve cuts back quantitative easing to US$75 billion a month

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

US Federal Reserve chairman Ben Bernanke has kicked off the Santa rally, after announcing that quantitative easing will be tapered back by US$10 billion to US$75 billion.

US Markets loved the news, with the Dow Jones Industrial Average (Index: ^DJI) soaring 1.8%, the S&P 500 (Index: ^GSPC) climbing 1.7% and the NASDAQ adding 1.2%. Locally, the SPI Futures suggests the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) will open 51 points higher.

The Australian dollar (CCY: AUDUSD=X) has fallen against the greenback after the US Fed taper announcement and is now buying 88.6 US cents.

Signs the US is recovering include:-

  • An unemployment rate that fell to 7% in November, a five-year low
  • retail sales climbed the most in five months in November – a sign that consumers are back spending
  • industrial production in November increased by the most in a year
  • and, low interest rates are prompting consumers to buy homes or refinance, which has ignited a recovery in the housing market

The US Federal Reserve has indicated that it will keep interest rates low for some time, saying it "was a long way from raising borrowing costs", and its benchmark rate was likely to stay low, even "well past the time that unemployment declines below 6.5%".

The news augurs well for stock markets, which appear to have been expecting the Fed to stop its quantitative easing completely, despite repeated comments that the US central bank was likely to slowly take its foot off the accelerator, rather than slam on the brakes.

Foolish takeaway

One has to wonder now what markets have been so worried about, with the ASX 200 dropping in eight of the last nine days. Bring on the Santa Rally!

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »